8.7 pm

Mr. Andrew Dismore (Hendon):
I am pleased to follow the hon. Member for Sutton Coldfield (Mr. Mitchell) because my starting point is the same as his. I should say first that I welcome the Bill, because it makes important provision for pensioners, especially the sort of people whom I encounter all the time in my constituency, who tell me that they have a small occupational pension or savings and feel that they have missed out on all the additional help that we have given to pensioners so far.

The hon. Gentleman spoke first about complexityan issue that I think is greatly overstated. In the Chamber tonight are a few pensions nerds who are extremely interested in the minutiae of pension schemes. They sit on both sides of the House and include the professor who leads for the Liberal Democrats. To be frank, when I speak to pensioners' groups in my constituency, I find that they are interested not in the algebraic formulae, but in how much money they will get at the end of the day. When speaking to such groups, I give them a copy of the ready reckoner that appeared at the back of the White Paper and which is now found in the policy statement. They know how much money they have put away, or how much their pension income is, so they should be able to work out for themselves how much money they will get. Most are able to do so.

All the pensioners in my constituency who will be affected by the pension credit are not like those who are represented by some Conservative Members. They do not

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have enormous share portfolios or complicated trust arrangements. They have small occupational pensions, perhaps derived from the public services, or they have been able to put away the odd thousand pounds or two. They know how much money they havethey do not have great complicated problems. They are the people we are trying to help. People with great complicated problems are not those who will come within the pension credit regime.

Sandra Osborne (Ayr):
I agree with my hon. Friend. Does he agree that those are the pensioners who are most aggrieved about the current position and who feel most strongly that they are missing out, and that they will warmly welcome the pension credit?

Mr. Dismore:
I very much agree. One criticism of the alternative proposal advanced by the IPPR, the Liberal Democrats and now, I presume, the Conservatives, is that the position would be even worse for people who have paid national insurance; they would not benefit from having done so because those contributions would be equalised at the MIG level, whether the basic pension or the MIG is paid.

Lynne Jones:
Will my hon. Friend give way?

Mr. Dismore:
We have a limited amount of time, and I should like to make some progress.

There is also the question of the great evil monster that we are creating by extending the means test to more people. Frankly, if more people get involved in means-testing, the stigma will be reduced and greater numbers of people will claim. In Australia, the entire pension system is means-tested, but that is not a disincentive for people wishing to make a claim.

The Government's proposals are much simpler than present arrangements; we are not talking about weekly assessments and intrusive 40-page application forms which, I am pleased to say, have now been reduced. I can understand why people get concerned if, for example, they are asked whether they are pregnant; that question was on one of the old forms. We sensibly envisage a broad-brush approach with a five-yearly assessment and a pension stock-take with the first claim when someone reaches pensionable age. Most pensioners will find that much easier and more straightforward. The complications ascribed to the proposals are erroneous.

Claiming through a pensions agency will be easier than claiming under current arrangements. However, when replying to the debate, I urge my hon. Friend the Minister to consider the position of pensioners in the south-east. There is no pensions agency office in the south-east at the moment, which could create particular problems for ethnic minority pensioners. In London, 300 different languages are already spoken; if call centres are spread around the world and a call is re-routed to, say, Newcastle it may be difficult for Cockneys to understand the Geordie accent, never mind Geordies trying to understand the more obscure dialects and languages spoken in London. I hope that we can address that. I should also be grateful for confirmation that telephone calls will be charged at local rate; I hope that one day, it will be possible for calls to be free.

I am pleased that face-to-face interviews will still be possible for pensioners who prefer to deal with their pension arrangements that way. I am pleased that we are

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adopting an outreach approach by going to libraries and pensioners' groups. However, how long will it take to arrange a personal interview if a pensioner applies for one? I am pleased that the Secretary of State, in introducing the debate, dealt with the question of part-time earnings, about which I am very concerned. If we take a more flexible approach to retirement and ask people to continue to work later in life, we must make sure that people are not penalised for working the odd day or two and can gradually ease into full-time retirement, if one can put it that way. I am a great believer in flexibility, but there could be problems with the means test if someone's employment patterns swing from one extreme to the other.

I am pleased that the Government have accepted the point about downrating for hospital stays to 13 weeks; it is important to adjust calculations in relation to that. We have been assured that housing benefit and council tax benefit claimants will continue to receive their full benefits, but I am concerned about the way in which the mechanics will operate. The Opposition spokesman made an important point about local authority care charges, whether for social services support at home or residential care. I urge Ministers to talk soon to the Department of Health to make sure that we can give clear guidance to people who say, "Well, you've put my pension up, but the council just claim it all back it back again through a council tax rise." They should not be left in that position. If they are in residential care or in receipt of personal social services for which a charge is levied, they should not be penalised through local authority means-testing. As has been said, that would simply mean that we would be transferring a penalty to local authority benefits, which should rightly go into the pensioners' pockets.

I heed your request, Mr. Deputy Speaker, to draw my remarks to a close. The one outstanding question to which I would like an answer is that of uprating. In the Select Committee, the Secretary of State was pressed hard on uprating; it is important that the Government say whether they regard uprating as the way to proceed.

8.14 pm

Mr. Paul Goodman (Wycombe):
All Governments face the dilemma of trying to solve the trade-off between poverty and saving. This Government find themselves wrestling with that dilemma now. Obviously one could, if one concentrated exclusively on relieving poverty, create disincentives to saving; or one could, if one wanted solely to create incentives to save, end up with growing numbers of pensioners in poverty.

The Government's central claim for the Bill is that it will reduce poverty and increase saving; it is on those two claims that the Bill should primarily be judged. The most effective way to begin to make that judgment is to look at the main way in which the pension credit will be deliveredin other words, means-testing. I shall give the House a few simple figures. In 1979, approximately 57 per cent. of all pensioners were means-tested; by 1995, the figure had come down to 38 per cent. The Library estimates that by next year the figure will have returned to 57 per cent; by 2050, up to 70 per cent. of all pensioners could be on pension credit, if it lasts until then. I want to make an important concession to the Government, who contend that means-testing is the best way to help poorer people; their main argument is that that method targets people individually. That is right, and it is a strength of their position.

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However, there is a difficulty. How do the Government's argument and all the abstract arguments flung around the Chamber this evening relate to the experience of the people in, say, my Wycombe constituency which, in places, is not particularly rich; people do not always have, to quote the hon. Member for Hendon (Mr. Dismore) "enormous share portfolios". Some of the people who come to see me find the forms that they have to fill in complex; they find the relationship between one benefit and another extremely complex and do not fully grasp it. Indeed, I am not sure that I or many other Members in the Chamber fully grasp those complexities either. People often do not have a family member close at hand to advise them and are entirely reliant on professional advice. They are therefore experiencing genuine problems in dealing with increased means-testing.

Moving on to the link between increased means-testing and take-up, I want to quote some of the Government's own figures. The Secretary of State, if I understood him correctly, did not seem to have great confidence in all his figures, although the hon. Member for Northavon (Mr. Webb) shrewdly pointed out that in the House of Lords Baroness Hollis appeared to have great confidence in the same figures. I am therefore curious to know whether the Government's approach is consistent. The key figures for the minimum income guarantee are as follows. In 2001, about 1.7 million pensioners took up the MIG; the highest estimate is that 750,000 pensioners did not take it up. I want to make another concession to the Government for the moment and assume that that figure was in fact not 750,000, but about 500,000. By my figuresperhaps I am wrongthat is almost a third of those who took up the minimum income guarantee. So we are not talking about a small number or a small proportion. To nick, if I may, a phrase from Baroness Thatcher and apply it to Labour Members, we are talking about people who the Labour party likes to think of as its ownyet up to a third and certainly more than a quarter are not benefiting from the MIG.

The key point is that there is no hard evidence that a larger proportion of those entitled to the pension credit will take it up. The Government estimatethis is their aimthat 67 per cent. of those eligible will take up the pension credit by 2004, but even they admit that that target is "ambitious". Even if they reach the target, by definition, at least 33 per cent. will not take up the pension credit and therefore not benefit at all.

If I correctly understand the Government's approach from what the Secretary of State said earlier, their basic argument is that they do not want to consider the alternative of targeting by age because that would create anomaliesI agree; it certainly wouldand that they are content to carry on means-testing and means-testing, regardless of the proportion of pensioners who do not take up pension credit. That is a huge hole in the Government's argument, and it is where the pension credit fails the first of its two testswhether it will relieve poverty. For those who take it up, it surely will, but what about the third or quarter of those entitled who will not do so? I do not believe that the Government can or will carry on like this.

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The evidence on saving is ambiguous. Many figures have been bandied around the Chamber during this debate, but like my hon. Friend the Member for Havant (Mr. Willetts), I am content to rest on those from the Institute for Fiscal Studies. It says:

"Overall, the effect of the pension credit on the financial incentive to save is left unclear, for the relative magnitudes of the different effects we have disentangled are not known. So whether the pension credit will encourage or discourage saving is an empirical question on which future research may be enlightening."

In other words, the IFS simply does not know. I tend to think that if it does not know, the Government cannot say with certainty that the pension credit overall will boost savings. It is therefore perfectly clear that the Government's pension credit has failed one of the two tests, as we have no reason to think that the quarter or third of pensioners who do not take up the MIG will take up the pension credit. It is also clear that the Government have not really hit their target on saving.

My hon. Friend the Member for Havant made a series of telling points about the increasing crisis in pensions, with which the Government will now have to deal. Watching the Secretary of State, I got the feeling that he was digging himself deeper and deeper into the pension credit and more means-testing without being able to guarantee that that approach would stand up in the medium term, let alone the long term. The Government have put all their eggs in the pension credit basket.

The Government like to say that the pension credit is the final brick in the architecture and that, once it has been introduced, the whole Government pensions building will be secure and will stand. However, Conservative Members have very good reason to vote for the amendment, and will do so, as will the right hon. Member for Birkenhead (Mr. Field) and the hon. Member for Northavon.

As the hon. Member for Northavon said, the pension credit has been rushed in even though the Government are not yet clear about the consequences of the minimum income guarantee. Therefore, it is hard to see the pension credit as completing a perfect whole. It is far easier to see it as a sign of a Government whose pension strategy is in deep confusion. I urge the Government to think again about going down this road before they find themselves in a hole from which they cannot get out. That is why I, my hon. Friends and others will support the amendment.